Question

Question 3

Level Up reported the following information for 2016 and 2017:

Accounts payable, 31 December 2016 $50 000      

Accounts payable, 31 December 2017 $80 000    

Inventory, 31 December 2016 $60 000  

Inventory, 31 December 2017 $150 000    

Cost of goods sold—2017 $1 000 000

Assume that all merchandise purchases are on account. How much cash was paid to suppliers for inventory purchases during 2017?

                              

1. $1 085 000                              
2. $1 060 000                               
3. $1 070 000                          
4. $1 115 000

Question 4:

Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare the operating activities section?                               

1. The cash paid to purchase equipment would be reported as a cash outflow in the investing activities section                                
2. Cash proceeds from the sale of the equipment would be reported as a cash inflow in the investing activities section

                               

3. Depreciation expense would be added to total comprehensive income in the operating activities section                                
4. A loss on the sale of the equipment would be subtracted from total comprehensive income in the operating activities section

Answer 1

Question 3 )

Cost Of Goods Sold = Opening Inventory + Purchases - Closing Stock

Let Purchases by ' X '

$1,000,000 = $ 60,000 + X - $ 150,000

' X ' = $1,090,000

Total Purchases = $1,090,000

As given in the question  all the purchases are on Account ,

Closing Accounts Receivable = Opening Accounts Receivable + Purchases on Account - Payment made during the year

Let the Payments made during the year be ' Y '.

$ 80,000 = $ 50,000 + $ 1,090,000 - Y

Y = $ 1,060,000

Thus total payment made during the year = $ 1,060,000

Correct Answer is B,

Question 4 )

following statements are false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare the operating activities section.

1. The cash paid to purchase equipment would be reported as a cash outflow in the investing activities section                                
2. Cash proceeds from the sale of the equipment would be reported as a cash inflow in the investing activities section